Campaign season yields budget wars

INDIANAPOLIS -- Indiana may have launched a new fiscal year July 1, but partisan budget debates from 2005 are boiling again. House Republicans said Indiana will close the books today on the first balanced budget in 10 years, thanks to the fiscal discipline and economic growth policies supplied by them and Gov. Mitch Daniels. And they promised more of the same if voters pick them again in the fall elections to run the House. "We will adopt an honestly balanced budget, without gimmicks to balance it and without a general tax increase," said House Speaker Brian Bosma, R-Indianapolis. Bosma defined a balanced budget as one where projected revenues cover projected spending, and does not involve a paper balance achieved by funds transfers, payment delays or other accounting maneuvers. Bosma did allow the necessity of continued payment delays to schools, universities and local governments, because previously authorized delays were so large. Democrats seized that reasoning to assail the two-year budget, which ends next June and passed over their objections in the 2005 legislative session. By their count, the budget includes $441 million in payment delays and sizable transfers to the general fund. It also requires higher property taxes for K-12 schools and caps property tax relief payments to local governments and taxpayers. "So they have delays, they have transfers, (and) their property tax increases are huge," said House Minority Leader B. Patrick Bauer, D-South Bend. The dispute is not easily resolved. Most of the tax increases identified by Democrats involve property taxes, which are not a part of the state budget. And the deficit budgets passed into law when Democrats controlled the House also were approved by the Republican-controlled Senate, which included now-Lt. Gov. Becky Skillman. According to the independent, nonpartisan Indiana Fiscal Policy Institute, the current budget successfully eliminated a structural deficit and a general fund subsidy from state pension funds. The structural deficit is the difference between revenues and spending, regardless of surplus funds available to cover the gap. But a 2005 IFPI budget report also said the budget "relies upon increased local property taxes for K-12 ... funding and to offset a cap (in property tax relief payments)." Republicans said Monday that 2006 property taxes have remained flat or declined 1 percent, on average. The effect, noticed even in high-tax districts such as South Bend, is due to bipartisan approval of higher homestead credits for homeowners. But Bauer warned that property taxes will increase sharply next year without legislative action, which he proposed as the Democrats' top priority for 2007. According to Larry DeBoer, an agricultural economist at Purdue University, property taxes will increase an average 15 percent next year as new assessment rules intersect with the budget. Asked about the prediction, Bosma said lawmakers will "deal with it when it comes." But he also said voters should not trust Democrats to accurately describe Indiana's fiscal health, because Democrats inaccurately predicted large property taxes this year and unrealized teacher shortages in the school year that just finished. "A zero percent (property tax increase this year) is good enough for me," he said. Staff writer Martin DeAgostino: mdeagostino@sbtinfo.com (317) 634-1707